Small-Business-Act-2015Section 150 of the Small Business, Enterprise and Employment Act 2015 provides for a new Part 2A to be inserted in the Employment Tribunals Act 1996 and entitled “Financial Penalties for Failure to Pay Sums Ordered to be Paid or Settlement Sums”. This brings into effect the much heralded and somewhat delayed procedure for imposing financial penalties on paying parties who do not make their payments on time. Notably, any lateness, even of a day or two, can trigger the process although there is a final opportunity to make payment before the fine is levied.

New section 37A confirms that the scope is financial awards made by an order in tribunal proceedings including costs and expenses and amounts ordered to be paid to the Secretary of State. The amount covered includes the initial award and interest. It does not include any amount awarded when the order can still be appealed. Where an award is payable by instalments and there is a default in making a payment when it falls due any remaining instalments are treated as falling due on the same date as the missed payment, i.e. the balance is treated as payable forthwith.

The new system provides for the appointment of enforcement officers. Where a default is identified an enforcement officer may issue a warning notice stating an intention to impose a financial penalty overdue payments are made by a specified date. If there has been a prior penalty notice a further one cannot be issued for at least three months since the end of the prior relevant period. the date for payment (the specified date) must be at least 28 days after the date of the warning notice and the specified amount must be the amount due on the date when the warning notice is given. Once served it is possible for the employer (assuming that the employer is the paying party) to make representations with a view to challenging the order.

If the employer fails to comply with the warning notice an enforcement officer may issue a penalty notice This requires the paying party to pay a financial penalty to the Secretary of State. If the unpaid amount is less than £200 the penalty is £100. If it is more than £10,000 the penalty is £5000. Otherwise it is 50% of the unpaid amount of the relevant sum.

There is an appeals procedure. However the grounds of appeal are limited to (i) the grounds stated on the notice are incorrect, (ii) it was unreasonable for the enforcement officer to have issued the notice; and (iii) the calculation of the amount stated in the penalty notice is incorrect.

The new scheme comes into force on 6 April 2016. It remains to be seen how it will work in practice. However, bearing in mind that it will raise funds for the Government, it is reasonable to assume that it will be applied in most if not all relevant cases.